Murky Prospects for Yokohama IR

By Michael Penn, AGB Japan correspondent.

Most gaming industry analysis currently predicts that the city of Yokohama may very well become the host for Japan’s largest IR in the mid-2020s. Situated in Kanagawa Prefecture as part of Japan’s capital region—with its vast population of tens of millions—almost any major IR operator would love to have a piece of this action; but even should Japan’s IR Implementation Bill pass smoothly through the national legislature, it remains far from clear that Yokohama will actually decide to seek a license.

Until last year, Yokohama was indeed one of the more proactive municipal governments. The city has commissioned several major IR studies, a couple of which reach nearly 200 pages in length. The most likely location for the construction of a Yokohama IR has also been identified—the Yamashita Pier district near the main seaside park and the city’s famous Chinatown.

Moreover, the business-friendly Yokohama Mayor Fumiko Hayashi has expressed a positive view about the economic potential of an IR, and seems to be personally in favor of it.

But Yokohama is also a large and rich city encompassing many other interests. The population within the municipality itself exceeds 3.7 million people, and their views regarding the hosting of an IR are very different from that of their mayor. According to a Kyodo News poll published on Monday, only 22.6 percent of the residents of the city are in favor of hosting an IR, while no less than 65.2 percent are opposed to the notion. That’s nearly a 3-to-1 margin against.

On Sunday, Mayor Hayashi faces an election against two opponents who have both made anti-casino sentiment the linchpin of their campaigns against her. Should either of these challengers win, there is no doubt that the Yokohama IR plan will be dead.

However, polling suggests that incumbent Mayor Hayashi will likely prevail, in spite of her unpopular views on hosting an IR. The 71-year-old mayor has served the city honorably for eight years, and there is a general sense of satisfaction about the quality of her administration. Even with national political winds having turned unfavorable for the ruling party, on the local scene Mayor Hayashi is seen as having done a very good job, and she’ll likely be rewarded for that perception on election day.

The assumption among international gaming industry analysts appears to be that once she is clear of the election, Mayor Hayashi will once again announce in favor of hosting an IR, and that all will soon be back on track.

For example, a Morningstar analysis published earlier this month offered the following prediction: “We think if incumbent mayor Fumiko Hayashi (who is in favor of gaming resorts) is re-elected in July, Yokohama will still have time to put up a proposal for an IR license before the bidding process concludes at the end of 2019.” The authors went on to suggest that the Yokohama IR could ultimately produce a nation-leading US$11.3 billion in annual sales, and that Las Vegas Sands would most likely become the operator (in spite of other reports suggesting that Sands has its eyes firmly focused on Osaka).

But the big question is, will Mayor Hayashi, after weeks of being hammered by her two rival candidates on the question of hosting an IR—and running away from any clear response to their goading—then simply turn around after election day and declare herself in favor after all? Will she risk the inevitable charges of deceiving the public and going against the sentiment held by city residents by a nearly 3-to-1 margin?

In advance of the election, the Japanese media asked Mayor Hayashi to clarify her policy on hosting an IR in the city. The following was her full response: “As regards Yamashita Pier, which lies along the rich waterfront of the city center, we would like to redevelop it as an environmentally-friendly smart area, bustling with attractive tourist and MICE facilities. But the city has not decided whether or not we will adopt the IR method here. We need to have a comprehensive debate about an IR after watching the policies that are adopted at the national level regarding such matters as the protection of youth, gambling addiction, money laundering, and crime prevention. Once the contents of these policies are known, and listening to the views of our citizens, we will then make an appropriate decision. For now, my policy is a blank slate.”

In sum, Mayor Hayashi has certainly kept the door open to the possibility of Yokohama hosting an IR at Yamashita Pier, but the surrounding political conditions for her to move forward aggressively after the election do not seem to be in place. She would face a relatively well-mobilized local opposition, which would be backed by a solid majority of public opinion. Even the local business community seems rather lukewarm in its support.

A victory for Fumiko Hayashi in Sunday’s election will keep alive the possibility of Yokohama bidding for an IR license, but the politically expedient choice for this major city—which already does quite well in pulling in tourists and other visitors—would seem to be to build entertainment and MICE facilities at Yamashita Pier, while sidestepping the deep controversy of hosting a casino.